Claire’s to extend maturity of $50 million revolving credit facility

By Devika Patel

Knoxville, Tenn., Dec. 9 – Claire’s Stores, Inc. plans to extend the maturity of its $50 million revolver by year end.

“We are engaged in ongoing and productive conversations with a number of lenders, including HSBC, to extend the maturity of our $50 million E.U. revolving credit facility,” chief executive officer Ron Marshall said on the company’s third quarter earnings call on Tuesday.

“We currently anticipate having this amended or refinanced by year end,” Marshall said.

Marshall also reported that the company expects the recent refinancing and exchange transactions will result in annual cash interest savings of $42 million for the company.

“In order to create enhanced liquidity, we launched a private exchange offer on Aug. 12 which was completed on Sept. 20,” chief executive officer Ron Marshall said on the company’s third quarter earnings call on Tuesday.

The exchange resulted in the issuance of $177.8 million of term loans maturing in 2021 in place of $573.9 million principal amount of notes. The notes were canceled.

“Completion of the exchange offer resulted in a reduction of the company’s total outstanding debt by approximately $396.1 million, Marshall added.

“Debt maturities were extended and the company estimates that it will realize annual cash interest savings of approximately $24 million.

“As a result of the completion of both the exchange offer and the May 2016 agreement with Apollo Funds to exchange subordinated notes for PIK notes, the company estimates it will realize annual cash interest savings of approximately $42 million.”

Concurrently with the exchange, Claire’s refinanced a $150 million U.S. revolving credit facility due in 2017 with a new $75 million ABL facility and a $40 million loan at Claire’s Gibraltar. Both the new facilities mature in 2019.

The company’s adjusted EBITDA in the fiscal 2016 third quarter was $37 million compared to $39.2 million last year.

As of Oct. 29, cash and cash equivalents were $40.5 million.

The company had $900,000 of availability under its credit facilities as of Oct. 29.

Exchange offers

On May 5, the Pembroke Pines, Fla.-based retailer of fashion accessories and jewelry exchanged $174.4 million principal amount of its 10½% senior subordinated notes due 2017 for $174.4 million principal amount of its newly issued 10½% pay-in-kind senior subordinated notes due June 1, 2017.

The company entered into two exchange agreements on May 4 with funds managed by affiliates of Apollo Global Management, LLC.

The existing subordinated notes had been acquired by the Apollo funds, the indirect controlling shareholders of the company, in the open market.

The new PIK notes were issued on May 4 with terms that are substantially the same as those of the existing subordinated notes except that interest will be paid in-kind on June 1 and may be paid in-kind, in cash or 50% cash/50% in-kind for the Dec. 1, 2016 interest payment. The new PIK notes may be redeemed at par at any time.

On Sept. 20, Claire’s said investors had tendered for exchange $332.9 million of its $450 million of 8 7/8% senior secured second-lien notes due 2019, $320 million of 7¾% senior notes due 2020 and $26.5 million of 10½% senior subordinated notes due 2017.

The exchange ended at one minute after 11:59 p.m. ET on Sept. 19 after being extended multiple times.

The company was offering to exchange any and all of its 8 7/8% notes, 7¾% notes and 10½% notes not held by Claire’s Inc. for up to $40 million of new senior secured term loans of Claire’s Stores, up to $130 million of new senior secured term loans of CLSIP LLC, a newly formed unrestricted subsidiary of Claire’s Stores, and up to $60 million of new senior term loans of Claire’s (Gibraltar) Holdings Ltd., the holding company of Claire’s Stores’ European operations.

Holders had tendered for exchange $228.9 million of second-lien notes, $103.3 million of unsecured notes and $800,000 of subordinated notes.

For each $1,000 principal amount of notes exchanged by 5 p.m. ET on Sept. 1, the early deadline, the company offered the following:

• For the 8 7/8% notes, $55.02 of Claire’s Stores term loans, $178.81 of CLSIP term loans and $82.53 of Claire’s Gibraltar term loans, for $316.36 of total term loans;

• For the 7¾% notes, $39.76 of Claire’s Stores term loans, $129.24 of CLSIP term loans and $59.64 of Claire’s Gibraltar term loans, for $228.64 of total term loans; and

• For the 10½% notes, $95.01 of Claire’s Stores term loans, $308.65 of CLSIP term loans and $142.52 of Claire’s Gibraltar term loans, for $546.18 of total term loans.

Each of the above payments included an early tender premium of $30.00 of Claire’s Gibraltar term loans.

Refinancing

In connection with the exchange offer, Claire’s Stores completed a refinancing transaction with the lenders under its existing $115 million revolving credit facility. Under this refinancing

• Claire’s Gibraltar will be party to a new $40 million credit agreement maturing Feb. 4, 2019 with the lenders of the U.S. credit facility, the proceeds of which will be used to reduce outstanding amounts under the U.S. credit facility by $40 million;

• Claire’s Stores, its domestic subsidiaries and Claire’s Inc. will be parties to a new ABL credit agreement maturing Feb. 4, 2019, providing for revolving credit loans that will have a primary lien on ABL collateral, and availability subject to a borrowing base of up to $75 million less any amounts outstanding under the U.S. credit facility, the proceeds of which will be used to reduce outstanding amounts under the U.S. credit facility;

• The availability of the U.S. credit facility will be reduced to an amount equal to $75 million less any amounts outstanding under the ABL credit facility from time-to-time; and

• The maturity of the U.S. credit facility will be extended until Feb. 4, 2019.

Claire’s Gibraltar and certain subsidiaries are party to a $50 million unsecured multi-currency revolving credit facility that matures Aug. 20, 2017. Consent of the lender under that credit facility was required for the completion of the exchange and also was required to allow Claire’s Gibraltar to distribute cash to Claire’s Stores in an amount required to enable Claire’s Stores to fund its near-term debt service and other obligations. The lender provided those consents.

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